Enlarge imageBy Mark Potter
LONDON (Reuters) - Kesa Electricals Plc, Europe’s third-biggest electrical retailer, signalled a sharp slowdown in second-quarter like-for-like sales on Thursday and said it expected tough trading conditions to continue.
Kesa, which makes about three-quarters of its operating profit in France, said like-for-like sales fell 0.7 percent from February 1 to July 18, with sales slowing at all of its main businesses compared with the first quarter.
Like-for-like sales at its Darty unit, the French market leader, were up 1.8 percent, slowing from 3.3 percent growth in the first quarter. Profitability was also down, as sales were strongest among low-margin products such as flat-screen TVs and MP3 players and weaker among higher margin fridges and freezers.
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Like-for-like sales at its Comet business, Britain’s second-biggest speciality electricals retailer, were down 5 percent, accelerating a first-quarter drop of 2.2 percent.
Traders said they expected Kesa shares to open down around 10 pence on Thursday. The shares, which have underperformed European retailers by 9 percent since the start of the year, closed at 268 pence on Wednesday, valuing the business at about 1.4 billion pounds.
"It looks disappointing, particularly the decline in profitability at Darty," said Nick Bubb, an industry analyst at Evolution Securities, noting that solid demand in France had previously been offsetting weak trading in the UK.
Retailers across Britain are struggling as debt-laden shoppers curb spending after interest rate hikes and amid stagnating house prices. French consumer confidence has also fallen recently amid stubbornly high unemployment levels.
"The group’s performance in the period reflects the deteriorating retail conditions across our markets," Chief Executive Jean-Noel Labroue said in a statement.
"Anticipating that the difficult market conditions will continue, our businesses are working hard to manage margins and streamline their organisations in preparation for our important second half," he added.
Like-for-like sales at French furniture chain BUT were up 3.1 percent, compared with a 4.8 percent rise in the first-quarter.
Total sales, including new selling space, were up 2.3 percent in local currency terms and up 3.8 percent in sterling.
